05 Nov 2009

Operation dates of modern awards and some phasing-in

by Dr Graham Smith

With 1 January 2010 looming, employers should examine their award obligations from 1 January 2010 and what the phased in introduction in relevant awards may mean for them.

January 1, 2010 is looming and modernised awards will commence operation on that date. The Australian Industrial Relations Commission is continuing its role in modernising awards, and is scheduled to finish by 31 December 2009. It announced on 2 September 2009 that some provisions in certain modern awards - minimum wages, loadings and penalties -will not operate on 1 January 2010 but will be phased in over a five-year period, starting 1 July 2010 and ending on 1 July 2014.

Operative date and "BOOT"

The new modernised awards will generally operate from 1 January 2010, apart from the provisions covered by the recent ruling about phased-in introduction (see below). Together with the National Employment Standards, the modern awards will form a safety net for employees covered by them. This safety net will be relevant to the approval of enterprise agreements by Fair Work Australia under the Fair Work Act 2009 as it is the yardstick or benchmark for the "better off overall test" ("BOOT"), which operates from 1 January 2010.

Wage rates and penalty changes: phased in introduction to 2014

The Commission announced on 2 September 2009 that there would be a staggered introduction of changes in wage rates and penalties for those awards dealt with as priority awards and in stage two of the modernisation process.

Applies to certain matters

The phased-in introduction is to apply only to certain matters in the award as stated by the Commission:

"minimum wages, including wages for junior employees, employees to whom training arrangements apply and employees with a disability, casual and part-time loadings, Saturday, Sunday, public holiday, evening and other penalties and shift allowances."

Problem of reducing or increasing rates and costs

In considering the transition to modern awards, the problems identified were that:

  • employers might experience costs increases where the new modern award rates are higher than existing award rates; and
  • employees might suffer reduced entitlements where the new modern award rates are lower than the existing award rates.

The Commission noted that the request to modernise awards made by the Minister for Employment and Workplace Relations "provides that the process is not intended to disadvantage employees or increase costs for employers – objectives which are potentially competing".

In order to comply with the request and to soften the impact of the rate changes for both employers and employees, the Commission decided to phase in the operation of the outlined monetary entitlements over quite a long period of five years.

The phase in will start on 1 July 2010 and finish on 1 July 2014.

Transitioning the operative dates: 2010 to 2014

The transitioning arrangements are to apply as follows to the outlined matters only:

  1. rates in existing awards (pre-modern awards) will apply to 1 July 2010;
  2. there will be phased-in entitlements over five years where the modern award has better provisions than exist in pre-modern awards;
  3. the phased-in commencement in (2) would be in five annual increments of 20 percent of the differential between new modern award rates and pre-modern rates;
  4. any downward movement necessitated because the modern award rates are lower than the pre-modern rates will also be phased in over five years commencing on 1 July 2010 and again will be in five instalments equal to 20 percent of the rate differential.

Implications for employers

With 1 January 2010 looming, employers should examine their award obligations from 1 January 2010 and what the phased in introduction in relevant awards may mean for them. They may need to seek legal advice on which obligations commence under modern awards on 1 January 2010 and which obligations may start later on 1 July 2010.

For some employers the transaction costs of implementing the staggered approach may not warrant the phased in approach to the increased rates over a period as long as five years. These employers may need legal advice on strategies for, and implications of, any proposals to bring in the rate increases immediately on 1 January 2010 rather than deferring them.


Thanks to Marilyn Pittard for her help in writing this article.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.